John Maginnis: Federal probe hangs over La. government program

The Baton Rouge offices of CNSI, in a nondescript two-story building behind a beauty salon on Florida Boulevard, looks like a neutron bomb went off there. Room after room of neat rows of desks sit ready and waiting for 100 or so employees, who likely won't be coming back. The place bustled with activity until a month ago, when it emptied with the cancelation of the firm's huge state Medicaid claims processing contract, after it attracted the interest of a federal grand jury.

The laid-off employees, many of whom had uprooted their lives and moved to Louisiana to work on setting up the new online system, are the first victims of a federal investigation that could claim more, both within CNSI and state government. The only other casualty so far is Department of Health and Hospitals Secretary Bruce Greenstein, himself a former CNSI executive, who announced his resignation the week after a federal subpoena was made public. The subpoena ordered the Division of Administration to hand over all documents submitted by CNSI and three other companies that competed for the $185 million contract in 2011. Beyond that, the U.S. attorney's office in Baton Rouge has not indicated where its probe is headed. In the CNSI conference room, company president Adnan Ahmed and senior account executive Larry Iverson said in an interview they too are waiting for someone to tell them what this is all about, as they have not been contacted by the U.S. attorney or the FBI. "There is a lot of misinformation floating around out there," said Ahmed, who speculates that the Jindal administration over-reacted in abruptly canceling the contract, citing an anti-fraud provision in state law. CNSI denies wrongdoing and will challenge the cancelation administratively and, if necessary, in court.

A potential investigative focus is a proposed $40 million contract amendment to strengthen, of all things, anti-fraud protection. The planned expansion piqued interest because when CNSI won the contract, its competitors charged the company had "low-balled" its bid to get the business. CNSI asserts that DHH brought the contract expansion to it after current contractor Molina, passed on the addition.

Commissioner of Administration Kristy Nichols rejected the expansion in mid-March after she got a heads up from the state attorney general's office, which told her to beware of CNSI contract amendments. That's also when she learned about the federal subpoena, two weeks before nixing the whole deal.

A recent Baton Rouge Advocate story revealed that DHH has put the chief of the agency's program integrity section on paid administrative leave while it reviews her dealings with the CNSI contract and the proposed $40 million amendment. The official, Jina Hughes, is married to Robert Hughes, a CNSI data manager and analyst. DHH received a 2012 ethics opinion stating it was not a conflict for the husband of a department official to work for a company holding a DHH contract, with the qualification that the opinion is "based solely on the facts as set forth herein."

Also floating are strong rumors about a whistleblower in DHH, which could be what started the feds looking. This leads to speculation that the FBI has taped conversations between involved parties, which is in line with how the agency investigates.

This all could go away without another peep from the feds, but an information-gathering subpoena suggests that some significant information already has been gathered. One imagines that the proceedings are being watched with keen interest in the White House, which is already at odds with Gov. Bobby Jindal over his refusal to accept the expansion of Medicaid and his invectives against the Affordable Care Act. A scandal within the state Medicaid program would not reflect well on his national reputation.

The question is, how high up the ladder does the probe go? If it is confined to possible mid-level wrongdoing, Jindal could get past that. But the closer it gets to the top, possibly to the former secretary, the more damaging would be the impact on an administration that claims to be first in ethics. With the governor pressing his argument that the income tax is the greatest impediment to the state's economic progress, what a bummer it would be for him, for all of us, to have that old impediment to doing business in Louisiana, political corruption, rear its ugly head again.

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John Maginnis: Federal probe hangs over La. government program

The Baton Rouge offices of CNSI, in a nondescript two-story building behind a beauty salon on Florida Boulevard, looks like a neutron bomb went off there.